Volker explains how vote on ‘banking’ bill to impact Ukraine's future

“Ukraine’s Parliament will face a moment of truth when it meets [to vote on the bill on improvement of banking regulation mechanisms]... As the novel coronavirus increasingly impacts the country, the Rada must finally pass the banking legislation necessary to free up $8 billion in IMF funding, and a further $1.5 billion from other sources,” former U.S. special representative for Ukraine negotiations Kurt Volker wrote in the article for the Center for European Policy Analysis (CEPA).

The expert highlights that the Verkhovna Rada must approve banking legislation that prevents the return of nationalized banks (i.e., Privatbank) to former owners, or the payment of compensation to those former owners.

“Ukrainian taxpayers already paid once when bailing out the bank after those former owners could not account for billions of dollars. Neither the Ukrainian taxpayers, nor the international financial institutions standing behind them, should pay anything more,” he writes.

Volker reminds that Ukraine has improved dramatically its finances and borrowing costs, advanced stalled reforms, repositioned itself in the eyes of foreign investors, and laid the foundations for rapid growth in recent years.

 “Ukraine was outpacing global markets for the first time since achieving independence in 1991,” he underscores.

However, the replacement of a young, committed team of reformers with new faces — some of whom seemed connected to anti-reform oligarchs — shocked markets, the diplomat notes.

“The replacement of the Prosecutor General, who had earned wide respect for fighting corruption, added to concerns.  The result was a dramatic rise in borrowing costs, and darkening clouds over the national economy. Suddenly, as global markets began falling due to coronavirus, Ukraine was falling even faster,” Volker writes.

However, according to him, the IMF, the World Bank, and the EU are ready to help Ukraine through the crisis.

“The IMF has boosted its package from $5 billion to $8 billion, the World Bank is offering $1 billion, and the EU a further $500 million. At least $2 billion would be disbursed quickly by the IMF, making funds available almost immediately to fight the coronavirus. Without such financial assistance — and the seal of good housekeeping the IMF package represents — Ukraine’s financial position would fall even faster than it is falling today,” Volker emphasizes.

To secure this financial support, the Rada must approve banking legislation, the former U.S. special representative underscores.

“Getting the IMF package and other financing in place is also essential in the face of continued Russian aggression. Russia sees a weak Ukraine, without international support, as an easy target for the continued application of military, political, and psychological pressure,” he writes.

A strong Ukraine, with a growing economy, oriented toward the EU and NATO, and with strong support from allies, can more easily stand firm.

 “Land reform and banking legislation are not end-points; they are steps in the long journey President Zelensky promised during his election campaign,” the diplomat notes.

He emphasizes that Ukraine still needs an independent, qualified judiciary; a qualified and impartial Prosecutor General’s office and State Bureau of Investigations; anti-trust legislation and enforcement mechanisms to regulate the role of oligarchs; and an opening up of economic sectors to competition and foreign investment.

“The Rada’s vote on April 10 is indeed a moment of truth. Let’s hope it finally cements Ukraine’s path into the future,” Volker sums up.

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